A ferocious two-year battle between Argentina's president and the country's leading media empire has gone beyond tax raids and soccer broadcast squabbles to dredging up mud from the country's dark past.

Government officials say the owner of Grupo Clarin may have adopted two babies stolen from murdered political prisoners during the 1976-1983 military dictatorship, and President Cristina Fernandez has urged courts to investigate.

The adopted children of Clarin owner Ernestina Herrera de Noble, one of the country's richest women, accuse Fernandez of using them as pawns in her conflict with their mother's company.

"We feel scared, anguished, insecure, persecuted," Felipe Noble Herrera and his sister Marcela, both 34, said in a televised statement last week.

The conflict, in which Clarin claims it is being harassed and the government accuses the media group of conspiring against it, has soured Argentina's wobbly reputation with investors. It could also weaken a bid by Fernandez's husband, ex-President Nestor Kirchner, to return to power next year.

The Noble Herrera siblings said they don't believe they are children of disappeared political prisoners, but they have resisted turning over DNA samples without limits on their use, saying they could be politically manipulated.

They say the story of their adoption is being used to try to discredit Clarin, one of Latin America's biggest media groups, by associating their mother with the military governments that killed as many as 30,000 dissidents.

Clarin (CLA.BA) (GCSAq.L), a $900 million company with newspapers, broadcast and cable television, radio and Internet holdings, generally gave favorable coverage to Kirchner, Fernandez's husband and predecessor as president.

But in 2008 its flagship newspaper and cable news channel turned against Fernandez during a bitter tax revolt by farmers that evolved into a major political crisis from which the president's approval ratings have never recovered.

Since 2008, the government has sent dozens of tax investigators to Clarin headquarters, tried to take over its newsprint plant, reformed a media law to force the conglomerate to sell assets and nationalized the lucrative soccer broadcasting contract.

Posters attacking Clarin journalists have appeared on buildings all over the capital. The Kirchners, who have always been press shy, deny they are behind the campaign but often hit out at their media critics.

"Some of your colleagues should get rabies shots," the president told reporters on Wednesday. Later in the day her husband shouted "They lie, they lie," in an anti-Clarin speech to union leaders.

CREDIBILITY CRISIS

Conflicts between presidents and the media are common in Latin America, but the extremes of the Clarin-Kirchner battle highlight tensions in Argentina, where investors have wearied of government criticism and intervention in the markets.

"It doesn't inspire much confidence, it adds to Argentina's huge credibility crisis," said Jorge Asis, an author and former diplomat critical of both sides and who says a prolonged battle will hurt Kirchner's aim to run again for president.

The Kirchners have nationalized private pensions, the country's biggest airline and other sectors, and stepped up intervention in grain and financial markets.

Both sides have been harmed in the war between Clarin and the Kirchners.

Clarin's share price has plunged to 12 pesos per share from 24 pesos in early 2008, underperforming Argentina's benchmark stock index, MerVal .MERV, which hit record highs this year.

Clarin editors and executives say they feel abused by constant government investigations into the company. "It's a level of authoritarianism where they want to snuff out criticism," said Chief Financial Officer Alejandro Urricelqui.

The Kirchners, who were both briefly arrested during the dictatorship, paint the battle as a continuation of the ideological divide of the 1970s, with Clarin as the capitalist enemy linked to human rights violations.

"It all goes back to the same origin... Clarin's strategy all around is to keep laws from being applied and the truth from coming out," said Gabriel Mariotto, director of the state broadcast regulator and the man behind the new media law.

Clarin benefited from business deals under the dictatorship, he told Reuters.

Critics point out the Kirchners never made these accusations when Clarin's coverage was favorable, and say the couple is cynically using human rights issues against Clarin.

"The persecuted have become persecutors. They haven't learned anything from the past," said opposition lawmaker Patricia Bullrich, of the Civic Coalition party.

Herrera de Noble adopted Felipe and Marcela in 1976, at the beginning of the dictatorship. In the late 1970s, hundreds of children of Argentine political prisoners were illegally adopted by families with ties to the military.

Herrera de Noble, now 84, was briefly detained in 2002 on accusations of falsifying adoption papers but formal charges were never brought and her children's biological parentage remains unknown.

Human rights groups have spent decades trying to match up stolen children with their families. Fernandez allies the Grandmothers of the Plaza de Mayo have filed suit to force Marcela and Felipe to provide DNA samples for potential matching with families of dictatorship victims.

"For the Grandmothers this is not a fight between the government and a media group... It's not about politics. It's about human rights," Estela de Carlotto, head of the Grandmothers, told state-owned Channel 7 television last week. (Editing by Kieran Murray)